Ross Strauser broadcasts The Big Fish, an Internet-only radio station, from his home studio in Whitefish. Faced with federal changes to royalty payments Strauser considered shutting the station down before moving to an all-local format.
Montana’s first Internet-only radio station was nearly shut down before it ever really got started.
In January, Ross Strauser left the terrestrial radio business after 27 years—most recently with Kalispell’s Bee Broadcasting—to start The Big Fish out of his Whitefish home.
“It was a pretty scary thing to do after all those years,” Strauser says of launching the station.
But The Big Fish got off to a successful start. One of the differences between net and terrestrial radio is Strauser can get an exact count of how many people are tuned in, know where they’re listening from and for how long. With a format including some local news and talk, but mostly Top 40 spanning the last three decades, Strauser was attracting about 7,000 listeners per day.
He says this is much higher than the numbers he believed he got in terrestrial radio, which relies on polling to determine listenership.
Strauser’s success isn’t unusual for netradio. According to comScore, a marketing research company that tracks Internet traffic, the American Internet radio audience climbed to an all-time high of 34.5 million people in March. Arbitron/Edison Media Research, two other market research companies, estimate 20 million listeners worldwide tune in to netradio—such as the popular “music gnome project” at pandora.com—each week.
But this success was threatened on March 2, when the Copyright Royalty Board—which determines rates for copyrighted material in the United States—decided to change the way it charges fees for netradio. Originally, netradio broadcasters paid out about 6 percent to 12 percent of their gross income per month in royalties, much like terrestrial radio stations do. Under the new system, netradio broadcasters pay a $.0008 fee per song per listener. That fee is retroactive to January 2006. By 2010, the rates rise to $.0019 per song per listener. The rate scheme is the same as one proposed by SoundExchange, a royalty-collection agency.
These new rates promise to put netradio out of business.
SomaFM, a California-based webcaster and one of the largest netradio stations in the world, estimates its yearly fee for 2006 would go from the $20,000 it paid, to about $600,000. The company reported profits last year of $200,000.
Dan McSwain, editor of the Radio and Internet Newsletter, which opposes the royalty changes, told the Independent, “If the ruling doesn’t change, and no other form of intervention is successful…then the majority of the webcasting industry will disintegrate or exist in a much more abbreviated form, so that it won’t really look or sound or function like the Internet radio we currently use.”
Most webcasters, including SomaFM, have been fighting the board’s ruling, appealing to members of Congress to pass legislation overturning the decision so they don’t go out of business. It’s something McSwain believes will be successful.
“We know that representatives’ offices have received huge volumes of e-mails, letters and phone calls about this,” McSwain says. “We’re optimistic that something will come about in time to bail us out.”
So far, 65 U.S. House Representatives have co-sponsored the Internet Radio Equality Act, which would overturn the royalty board’s decision and reinstate the original fees.
Strauser doesn’t have exact figures, but he says under the current royalty schedule the fees would make his business unprofitable. But instead of fighting the current rules, Strauser decided to take a different tack.
“Rather than being caught off guard, we decided to be proactive,” he says.
Two weeks ago, The Big Fish shut down its usual stream of Top 40 hits by the likes of John Mellencamp, LeAnn Rimes and Dave Matthews Band. Since then, they’ve offered a free, on-demand service featuring local talent presenting restaurant reviews, local music shows and parenting advice.
Strauser hoped the current local lineup would fill the schedule until the Internet Radio Equality Act is passed, but then he noticed a strange thing. His listenership for the on-demand netradio was the same as when he just did Top 40.
“We were surprised,” Strauser says.
Ultimately, he believes it’s the specifically local flavor of his radio station bringing in the listeners.
“That’s one of the things terrestrial radio was missing out on—the local artists,” he says.
Now, Strauser doubts he’ll ever go back to buying Top 40. When The Big Fish resumes webcasting May 16, he says it will be local talk, local news and local music. In order for Montana musicians to have their music played on his station, Strauser asks them to sign a waiver allowing him to pay them the rates he did before the royalty board made its decision.
“A lot of the people we’re playing have never gotten air time,” Strauser says. “So they’re happy to do it.”
John Dunnigan, a local musician for more than 30 years and current host on one of The Big Fish’s on-demand stations, signed a waiver to get his music aired.
“It took a special radio station that would want to take the chance and do that, because so many radio stations are formatted,” he says. “In the old days, if you knew somebody, they’d sneak your songs on the radio, and oh, it was like nirvana. It was great.”
Dunnigan is enthusiastic about the possibilities The Big Fish presents to local musicians.
“From what looked like it was going to be a bad situation—I think Ross was thinking he’d have to shut down—it turned into this pretty cool thing,” he says. “It’s kind of a win-win situation. Suddenly the whole world, whether you live in Alabama or China, can hear a Montana artist.”